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Financial Reporting and the Board of Directors

Financial Reporting and the Board of Directors Michael R. Young Willkie Farr & Gallagher Three Topics The Origin of Financial Fraud Failures of Detection The Role of the Audit Committee The Origin of Financial Fraud Accounting Irregularities (1) Aggressive Financial Target

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Financial Reporting and the Board of Directors

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  1. Financial Reportingand the Board of Directors Michael R. Young Willkie Farr & Gallagher

  2. Three Topics • The Origin of Financial Fraud • Failures of Detection • The Role of the Audit Committee

  3. The Origin of Financial Fraud

  4. Accounting Irregularities (1) Aggressive Financial Target (2) Failure Unforgivable

  5. Accounting Irregularities (1) Aggressive Financial Target (2) Failure Unforgivable

  6. Shipment Acceleration

  7. Shipment Acceleration • Reserve Reduction

  8. Shipment Acceleration • Reserve Reduction

  9. Shipment Acceleration • Reserve Reduction • Bad Accounts Receivable

  10. Shipment Acceleration • Reserve Reduction • Bad Accounts Receivable • Expense Recognition Delay

  11. Shipment Acceleration • Reserve Reduction • Bad Accounts Receivable • Expense Recognition Delay • Intercompany Credits

  12. Acquisition Reserve Adjustments

  13. Acquisition Reserve Adjustments • Inventory “In Transit”

  14. Acquisition Reserve Adjustments • Inventory “In Transit” • Phantom Inventory

  15. Acquisition Reserve Adjustments • Inventory “In Transit” • Phantom Inventory • Phony Shipments

  16. Acquisition Reserve Adjustments • Inventory “In Transit” • Phantom Inventory • Phony Shipments • General Ledger Revisions

  17. FailuresofDetection

  18. Failure of Detection: The Outside Auditor

  19. Failure of Detection: Internal Audit

  20. Failure of Detection: The Audit Committee

  21. The Roleof the Audit Committee

  22. The New Rules • Power & Authority • Independence • Financial Sophistication • Diligence

  23. A Practical Approach • The “Tone at the Top” • Logistical Capability • Detection of Misreporting

  24. Financial Reportingand the Board of Directors Michael R. Young Willkie Farr & Gallagher

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